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FEATURES
The Definitive
18
Survey
of Sourcing
32 36
PROCESS By Namita Goel IS LPO RIGHT
FRAMEWORKS: Do process frameworks such as ITIL, Six FOR YOUR
Sigma and Lean deliver in the context of ser-
HELP OR vices outsourcing? A look at the challenges
COMPANY?
HINDRANCE? and opportunities in making them work By Daniel A Masur &
Sonia Baldia, Mayer
Brown LLP
Objective gating analysis in
legal process outsourcing
24X7 COLUMNISTS
9 AN ITO PROJECT
WELL DONE 12 INDIAN DOMESTIC LISA ROSS
Lisa is the CEO and
OUTSOURCING MAR-
17 days of Beijing Olympics are founder of FAO Research,
backed by four years of planning
KET ON AN UPTICK an independent research
and technology integration By Imrana Khan firm focused exclusively
on the FAO and procure-
By Imrana Khan ment outsourcing mar-
kets. As a leading analyst
9 CAPTIVES REFUSE
TO GO AWAY 14 MANY GERMAN,
BRITISH CO. S GET
in the outsourcing industry for more than 12
years, she works closely with customers, advi-
sors and suppliers of outsourcing services.
By Imrana Khan SOLD IN JULY ’08
By Tholons
SHYAMANUJA DAS
Shyamanuja pioneered
10 GOVT. DEFENSE
CONTRACTS RULE
outsourcing
GREEN: THE journalism in India in
THE TOP 10 CHARTS 15 NEW COLOR OF
1998 with bpOrbit, a
newsletter for the
By Datamonitor
OUTSOURCING domestic Indian BPO
By Namita Goel industry. He is now
10 CUSTOMERS EYEING
SMALLER PLAYERS
Editor, Dataquest magazine, Cybermedia.
FOR INNOVATION
By Imrana Khan LORI BLACKMAN
OUTSOURCING
16 TO MOROCCO
Lori is the Founder and
President of DNL
12 JOINING HANDS TO
AMEND INDIAN
By Keerthi Nair Global. DNL Global
offers solutions across
POLICIES the entire lifecycle of tal-
ent management.
By Imrana Khan
45 48 50
THE PARADOX OF THE PARAMETERS THE POWERFUL LINK
CURRENCY-ADJUST- OF EVALUATING BETWEEN TALENT
ED GROWTH SOURCING ADVISORY MANAGEMENT & BIZ
By Shyamanuja Das, FIRMS PERFORMANCE
CyberMedia By Phil Fersht, AMR Research By Allan Schweyer, HCI
EDITOR’S NOTE
Ed Nair
Editor, Global Services
Session Flow
08:00 to 08:30 Breakfast and registration Free Registration
08:30 to 08:35 Welcome address
Ed Nair, Editor, Global Services
08:35 to 09:10 Keynote address
Vamsee Tirukkala, Co-Founder & Managing Principal, Zinnov
Includes
l Event Sessions and
09:15 to 09:35 Emerging Models and Value Implications in Product Development Partnerships
Keynote
09:40 to 10:00 Choosing the Right Destination for Offshoring Product Development
l Breakfast, lunch
10:05 to 10:20 Networking Refreshment Break and networking
10:20 to 10:55 Developing Enterprise Software –A Case Study in OPD breaks
www.globalservicesmedia.com/events/opd
Sponsored by:
Produced by:
TM
The gateway to the global sourcing of IT and BPO services
24x7_Final786.qxp 8/21/2008 11:30 PM Page 9
24x7
An ITO Project Well Done
17 days of Beijing Olympics are backed by four years
Outsourcing
to Morocco
p. 16
Captives Refuse to
Go Away
of planning and technology integration BY IMRANA KHAN
BY IMRANA KHAN
required at 39 competitions and more Origin, working with the BOCOG announcing their plans for divesting
than 31 non-competition venues for and the consortium of technology their offshore captives in Q2 ’08. GS
making the event memorable for ages. service providers. GS
ITdeals
Govt. Defense Contracts Customers
Rule the Top 10 Chart BY IMRANA KHAN
BY DATAMONITOR
2
l South Tyneside Council BT Group Infrastructure mgmt. 597 10 with 35 percent of employees at small
l Dept. of Homeland Security CSC Data center outsourcing 391 8 (est.) providers holding Master’s degrees, versus
l U.S. Army Invertix Maintenance/support 300 5 23 percent who can make that claim at
l U.S. Army Stanley Computer engineering 300 5 mid-sized to large providers.
24x7
l Dept. of Defense Northrop Grumman Application mgmt. 240 4.5 “KPOs tend to have, not always but in
l NASA Qinetiq Infrastructure mgmt. 225 9 many cases, retention of employees. Unlike
TCS, Wipro, Infosys, small firms have a
* Application Development & Maintenance; SOURCE: DATAMONITOR IT SERVICES CONTRACTS DATABASE
Metrics
Eyeing Smaller Players for Innovation
unique culture. Employees are more sat-
isfied with their work and they know DELIVERY CENTER LOCATIONS — ALL PROVIDERS (%)
everyone who is around. In fact, the man- India 54
agement also has a better pulse over
Western Europe Western Europe 24
what’s happening. But it doesn’t apply for
(not China) is the top
everybody because a lot of small guys will China location after India 21
get bought out in the near future. The
Latin America 21
guys who survive tend to have at least
some scale. For example, a KPO shop of Eastern Europe 19
50 people will have a hard time. On the U.S. 19
Delivery center countries
many as 81 percent say financial com- business challenging. The study surveyed other countries, exploring the opportu-
pensation, and 77 percent say the need to 120 service providers spread across the nities and challenges facing innovation ser-
provide challenging work make their U.S., Europe, China, Brazil, India and vice providers.
In fact, customers’ satisfaction is an
emerging issue. More educated talent
PROVIDERS PLANNING NEW SERVICES doesn’t automatically translate into
BY SERVICE PROVIDER SIZE (%) customer retention. Around 65 percent of
Engineering 35 respondents to the study cite insufficient
service quality as most common reasons
24 for terminating a contract. “And 38 per-
Product
Development 11 cent state that their targeted cost savings
had not been achieved. Some of this dis-
24
satisfaction is reflected in KPO deal renew-
Research & al numbers, which trail those of traditional
11
Development outsourcing agreements. Offshore arrange-
14
ments focused on finance and accounting,
Knowledge/
Analytical
Services
12
22
and marketing/sales, have a 83 percent
renewal rate. By contrast, 68 percent of
engineering-focused contracts are renewed,
3
14
followed by 62 percent of new product
24x7
News Metrics
Joining Hands to Amend Infosys, TCS
Indian Policies BY IMRANA KHAN
BY IMRANA KHAN
D espite dollar depreciation and eco-
nomic downturn, India’s top-tier IT-
expected to reach $50 billion by trro, a BPO company and a mem- ment of Company Affairs-TCS deal, the
2012, creating direct employment ber of OSPAI. GS Dena Bank-Wipro deal, the Tata Teleser-
6 l Luxoft
l Fluensee
ITC Networks
TrenStar Tracking Solutions
IT services
IT software
—
— Canada: 1.9
France: 3.8
Others: 20.8
U.S.: 38.7
l Wolters Kluwer Compliance Online Internet —
24x7
Fiveplaces to visit
Tangier
This city is the gate-
BY KEERTHI NAIR
way to Africa for many
travelers. Tangier charms
you with highlights that
includes the medina, the
S ituated in northwestern Africa
with coasts on the Atlantic Ocean
and the Mediterranean Sea, Moroc-
percent in 1999 to 9.8 percent in
2007 and 9.6 percent over the first
quarter of 2008 — and is again
Kasbah and the Ville Nouvelle. The city’s beautiful
beaches make it a favored destination among
co ushers in dynamism and consti- expected to drop to 9.2 percent in the
tourists, artists, poets and writers. tutes a link between Africa, Europe, second quarter of this year.
Fez the Occident and the Middle East According to McKinsey’s own
An ancient and making it a preferred regional busi- study, when compared with com-
religious capital city of
Morocco, Fez (Fès in
ness center. petitors such as Mauritius, Senegal,
French) is the living Morocco’s fate changed with the and Tunisia, Morocco is geographi-
example of a medieval construction of the CasaNearShore cally closer to France, has a larger and
Arab city with popular
monuments and architecture. The most famous Park — the first business area ded- more qualified talent pool, and boasts
place in Fez, Fez el-Bali, is a huge medina filled icated to offshore services and out- a better telecommunications infra-
with thousands of twisting alleyways and hundreds
of mosques. sourcing in Dec. ’05. Another park, structure. When measured against
Technopolis, constitutes engineer- Eastern European countries, Moroc-
Marrakech
It is known as ing, colleges and R&D spaces to tar- co presents reduced labor costs and a
the beautiful cultural get service providers. larger pool of French speakers. Rabat
center or imperial
capital of Southern Morocco boasts of a large pool of is the commercial and industrial cap-
Morocco. This city is HR as well — producing up to ital, Casablanca, the major econom-
most known for its
tranquility and peace; its beauty lies in the atmos-
50,000 university graduates annual- ic capital, and Marrakech, the com-
phere honeycombed alleys and minarets quivering ly. To ensure that the talent is well- mercial and cultural destination.
in the moonlight. It is here that time becomes sus- suited to BPO, ITO and KPO indus- A strong intellectual property
pended and you catch a glimpse of the past — so
rich and so remote and yet so palpable. try, promotion of technology and rights legislation, economic reforms,
Casablanca
professional training for 25,000 privatization program, willingness
This city, the modern recruits are being provided — from to build long-term trade and invest-
face and economic capital of
Morocco, has one of the
low-level administrative functions to ment ties, a highly motivated, young
largest artificial ports in the technicians to engineers to man- and skilled labor pool (well-versed in
world. Two places — the agers. All measures are being taken to French and Spanish), reliable tele-
Casablanca Central Market
and the Habbous Souk boost skilled talent to 100,000 by phone infrastructure and reduced
District — bustle with activity and thrill you with 2015, in order to maintain an abun- operating costs are attracting multi-
their variety of attractive merchandise.
dant supply of labor and prevent national corporations to invest in
RABAT wage inflation. World leaders of IT Morocco. With state-of-the-art high-
This city
(transliterated as and communication established in speed transportation lines, ports and
ar-Rabat or ar- Morocco include Cisco, Capgemini, harbors, railways, principal highways
Ribat) is the capital
8 of Morocco as well
as the Rabat-Salé-
Zemmour-Zaer
region. Situated on the Atlantic coast, it has nice
Compaq and more.
Such is the level of development
that Morocco’s employment min-
and airports with paved runways,
Morocco’s success story till date is
widely seen as a foundation to devel-
wide-open boulevards and shopping centers with istry indicates a fall in the overall op more offshore services there gen-
24x7
relatively important textile, food processing and unemployment rate — from 13.9 erating value. GS
construction industries.
SOURCES: APEBI, MOROCCAN FEDERATION OF INFORMATION TECHNOLOGIES, TELECOMMUNICATIONS AND
Compiled by Keerthi Nair OFFSHORING; SHAREDXPERTISE FORUMS; MOROCCAN AMERICAN TRADE AND INVESTMENT CENTER (MATIC) ;SITEL
Jobscut
Over 100,000 Jobs Cut in July ’08
BY NAMITA GOEL
J uly ’08 has shocked the jobs market flights, workers and services offered to
with 103,312 jobs cut in the month. customers — to meet the increasing
Even more alarming is the fact that the fuel prices.
MONTH BY MONTH TOTALS
Month 2008 2007
number of jobs cut has crossed the Next in line is the financial sector l April 90,015 70,672
100,000 mark the second time in the claiming 15,517 jobs cut in July. l May 103,522 71,115
year and twice in the same quarter, In the year-to-date category, the finan- l June 81,755 55,726
according to Challenger, Gray and cial sector has seen the highest num- l July 103,312 42,897
Christmas, a global outplacement con- ber of jobs lost, and have already
sultancy firm. The number is 141 per- announced 100,775 jobs cut that is 50 MORTGAGE / SUB-PRIME LAYOFFS
cent more than what it percent more than the Month 2008 2007
was a year ago and 26 2007 seven-month total l April 21,145 2,505
percent more than what MARKET CONDI- of 67,006. l May 15,505 3,948
it was a month back. New York City
Ironically, in 2007, July TIONS STILL TOPS headquartered firms
l June 18,936 3,713
l July 14,735 1,175
reported the least num- THE CHART OF have reported the max-
ber of jobs cut that year. imum number of cuts
Market conditions
REASONS FOR year-to-date. Region- JULY ’08 JOBS CUT REASONS
still tops the chart of JOBS CUT IN wise, West and South- Reasons Number
reasons for jobs cut in JULY, WHILE OUT- west U.S. — particu- of layoffs
July, while outsourcing larly Texas — reported l Market conditions 38,959
has moved further down SOURCING HAS the maximum job loss, l Closing 23,779
to the last but third posi- l Bankruptcy 11,259
MOVED FURTHER and East — Delaware l Restructuring 8,706
tion among the list of — reported the least
reasons. Surprisingly, ris- DOWN TO THE number of jobs cut. l Cost-cutting 6,268
ing costs due to inflation THIRD-LAST POSI- The hiring plans l Demand downturn 5,728
that’s making news these released by various sec- l Relocation 2,405
days does not feature TION AMONG THE tors during the month l Voluntary severance 2,271
amongst the severe rea- LIST OF REASONS. stood at 19,661, reveals l Reorganization 1,550
sons for job loss. the monthly report. It /consolidation
All the five major cannot possibly com- l Merger/acquisition 1,033
industries — financial, automotive, pensate for the number that is a little l Unknown 403
transportation, government / non-prof- over five times this figure. l Fluctuating sales 253
it and retail — have seen an increase in The year 2008 has also seen a trend of l Rising costs 200
jobs cut as compared to the last year. “Interim CEOs,” and the average l Technological update 200
The transportation sector has been the tenure among Interim CEOs through l Outsourcing 150
major contributor to this number with July ’08 was about six months. l Order cancellation 143
17,051 jobs lost. This was quite expect- Seventy one interim CEOs have been /reduction
ed considering the way airlines are cut- replaced by permanent successors, l Firing 5
ting costs — reducing number of including six in July this year. GS Total 103,312
9
SOURCE: CHALLENGER, GRAY & CHRISTMAS
“We have seen job cuts increase in the majority of industries that we track, indicating that the downturn, which was isolated
to the housing and financial sectors just a few months ago, has spread throughout much of the economy. While the latest
reading on gross domestic product confirms that we have not yet fallen into recession, the big worry is that the economy will
24x7
continue to under-perform. If that persists for several quarters, or even years, it will be seen as a recession, particularly for
job seekers," said John A. Challenger, CEO, Challenger, Gray & Christmas.
The Definitive
Survey of
cover story_final.qxp 8/22/2008 1:11 AM Page 19
Sourcing
Advisers
Welcome to the first ever study on sourcing advisory
companies that covers the views of
service buyers and providers
AA
By Ed Nair, Global Services, and Phil Fersht, AMR Research
S
OURCING ADVISERS ARE A unique breed — some sort of a hybrid
between operations and strategy consultants, with an added eye for
research. As all good things, they were born out of a necessity. Orga-
nizations looking to outsource and offshore pieces of technology work
did not have the requisite understanding of the dynamics of outsourcing to
a third party or of setting up offshore captives. Sourcing advisories came in
to facilitate the process and ended up playing variegated roles of being a pre-
ceptor, an adviser, a coach and a dealmaker. In the past decade, they have
A
grown to become entities with formidable influence and impact on the glob-
al services industry.
Special Report
What’s on Offer
The breadth of services that sourcing advisory companies
offer are a reflection of two clear trends in the practice of
global sourcing of services — increased complexity and grow-
ing maturity. Much of global sourcing continues to be an area
that requires specialized knowledge and expertise where the
scope for black box solutions is less. No wonder then that
more than half, up to nearly a third of advisers, are frequently
engaged in pre-transaction services like business-case devel-
opment, RFP formulation and provider selection. The SURVEY METHODOLOGY AND
other clear finding is that with sourcing contracts getting
RESPONDENTS' DETAILS
more complex, which in itself in an index of growing matu-
rity, the need for governance-related services are on the rise The Definitive Survey of Sourcing
compared to what it was two years ago. More than 50 per- Advisers was conducted jointly by Global
Services and AMR Research. The online
cent of the advisers reported the increased need for gover-
survey was done during the month of
nance services. July 2008 with participation from
respondents all over the world. In addi-
The Source of Sourcing tion, the sourcing advisory companies
How do sourcing advisers develop their business? While were asked to submit detailed informa-
many of them have both customers and service providers in tion about their firms.
their client roster, it is the latter that seems to keep the con-
sultants’ clocks ticking. With half the advisers citing their
relationships with providers as their primary source of new itiveness. Sourcing advisers are expected to transact sourcing
business, this does raise concerns over the bias in the selec- deals far more rapidly and often under a six-month time-
tion process. In other words, if provider X recommends to frame. To achieve this, most of them have reusable templates
its prospective customer the use of adviser Y, will adviser Y to assist in various stages of the sourcing lifecycle. While there
be more incented to recommend provider X in the hope of are obvious risks in rushing through a deal, as long as the
securing future business opportunities with that provider? So right provider is selected, a suitable master services agreement
customers need to avoid relying solely on their advisers’ rec- and base-line pricing structure developed, the adviser has
ommendations and access other independent research and done her job at this stage of the sourcing process. There have
advice to validate their decisions. been many instances where the adviser spent too long work-
ing on pre-transaction activity with the customers, resulting
Faster is Better in expensive consultant fees and, in hindsight, many of the
Global sourcing deals no longer have the luxury of time issues are better resolved during transition and governance
— companies are realizing that it is no longer about cost sav- processes, where “on-the-job” experience often leads to bet-
ings but the missed opportunity on value-add and compet- ter decisions.
Special Report
KEY FINDINGS OF THE SURVEY from EquaTerra, Everest Group and TPI, Deloitte Con-
sulting performed well in this category in addition to some
l Most demand is for pre-RFP services, but the need of the boutique firms, namely Alsbridge and the W Group,
for governance work is much greater than what it which favor hiring veteran consultants. The other area of
was two years ago increased importance involves the ability of the sourcing
l Half the advisers frequently won their business via adviser to deliver governance support and the nuances of sup-
provider relationships — does this encourage bias? porting post-transaction activities. Booz & Company and the
l Demand for rapid-transactions in under six-month
Hackett Group, with their experience working with complex
timeframes
l Traditional “big 3” — EquaTerra, Everest Group and
change in mature organizations, were noted high-perform-
TPI — perform most consistently across all cate- ers in this category.
gories. Booz & Company, Deloitte, PWC and the
Hackett Group perform well in some areas, but Providers’ Voice
average in others Though sourcing advisories have most of the lead-ins
l Many of the small boutiques performed strongly, coming from service providers, providers are peeved about
example Alsbridge and the W Group, whose perfor- the aggressive sales agenda from sourcing advisers. Providers
mance is clearly centered on consultant experience also came up with a litany of expectations from sourcing
l Providers want more communication in the process
advisories. Notably, providers want more quality commu-
and advisers with genuine outsourcing implementa-
tion experience (not simply strategy) nication from sourcing advisers; they want their share of
l Some customers want a tighter methodology to voice in the deal-making cycle. Also, service providers
shorten the advisory cycle and advisers with more expect sourcing advisers steeped in real-life outsourcing
domain expertise. experience to be brought into play in a variety of deals. So
a love-hate relationship between providers and sourcing
advisories, in some cases, and an unholy nexus in others,
Are you primarily a customer, adviser characterizes the relationship.
or provider of outsourcing services? (%) Customers’ Byte
n=530
Customers were found to be more equivocal about their
23 Customer of expectations from sourcing advisers. Their expectations are
outsourcing
services/
basic — sourcing advisers should have extensive process
currently knowledge, deep provider knowledge, and solid expertise in
evaluating the overall sourcing-evaluation methodology.
outsourcing
All-in-all, the role of the outsourcing adviser has
24 Outsourcing become a lot broader than simply administering an out-
adviser/ sourcing transaction. Some advisers recognize this fact while
consultant
some, unfortunately, do not. Customers not only cited deep
53 Provider of process acumen and provider knowledge as two of the crit-
outsourcing ical elements, but also mentioned their global perspective
services
and post-transactional knowledge as being important. As
SOURCE: GLOBAL SERVICES MEDIA / AMR RESEARCH SOURCING ADVISER STUDY, JULY 2008 customers strive to globalize their business models, they
view outsourcing as one vehicle to access low-cost offshore
Now the Oscars … Well, Not Quite talent, and stay competitive and nimble in global markets.
The traditional areas of the sourcing-advisory cycle, name- Hence, while achieving a successful outsourcing engage-
ly outsourcing strategy/business-case evaluation, provider ment is critical, the ability to tie their outsourcing envi-
selection and contract-negotiation skills, which are the ronment to their needs to be more competitive at a glob-
“bread-and-butter” skills needed to get to an outsourcing al level is equally important. Added to this is the fact that
transaction, were where the long-time established sourcing most customers cannot simply reach out into the market-
advisers performed the best, notably EquaTerra, Everest place to hire seasoned executives with outsourcing experi-
Group and TPI. Clearly, deal experience, existing intellec- ence — in most cases they have to re-train their existing
tual property and a good base of industry research serve these management to run a successful outsourced operation and
firms well in doing their job. The experience of the individual focus on adding higher-value competency to the business.
adviser — a veteran with deep business experience who The more the outsourcing adviser can engage in those high-
understands broader issues than simply executing an out- er-level conversations with their customers, the more suc-
sourcing transaction, and the corporate politics of out- cessful they will be, and the higher the value-impact they
sourcing — is also of high importance to customers. Apart will have on their customers. GS
Special Report
What typical sourcing engagements are How does your firm source most of your
your clients requesting? (%) customer leads? (%)
n=115 Advisers n=114 Advisers
100 100
80 80
60 60
40 40
20 20
0 t
0
n n n s s s s th g
tio en io tio ice ip ce le
ou in
ua pm ect t ia rv nsh ren t sa m r tis
l l e c -
ev
a el
o se go e
s
at
io nf
e
re -o
f ve
e dev der ne nc rel co Di rd Ad
s i n a g o
ca P ov ct
io
er
n er in W
s- RF Pr ov
id nd
nes n sa G rov te
si Tr
a P At
Bu
Frequently Occasionally Never Frequently Occasionally Never
21 7 to 12
months
32 Less than 3
months
47 4 to 6
months
SOURCE: GLOBAL SERVICES MEDIA / AMR RESEARCH SOURCING ADVISER STUDY, JULY 2008
Special Report
TPI
PwC
PA Consulting
neoIT
KPMG
Everest Group
EquaTerra
Deloitte
Others
0 20 40 60 80 100
Poor Average Good
SOURCE: GLOBAL SERVICES MEDIA / AMR RESEARCH SOURCING ADVISER STUDY, JULY 2008
Special Report
Others*
TPI
PwC
PA Consulting
neoIT
KPMG
The Hackett Group
Everest Group
EquaTerra
Deloitte
Booz & Company
Alsbridge
0 20 40 60 80 100
Poor OK/Good Great
* INCLUDES ARCHSTONE, PACE HARMON, PILLSBURY & W GROUP; ALL ADVISERS HAVE A MINIMUM OF SIX RESPONSES FROM BUYERS WITH EXP.
SOURCE: GLOBAL SERVICES MEDIA / AMR RESEARCH SOURCING ADVISER STUDY, JULY 2008
Others
The W Group
TPI
PwC
Pillsbury
PA Consulting
Pace Harmon
neoIT
KPMG
The Hackett Group
Everest Group
EquaTerra
Deloitte
Booz & Company
Archstone
Alsbridge
0 20 40 60 80 100
Poor Average Good
SOURCE: GLOBAL SERVICES MEDIA / AMR RESEARCH SOURCING ADVISER STUDY, JULY 2008
Special Report
Governance/provider
management knowledge
Negotiation skills
Global perspective
Overall sourcing
evaluation methodology
Deep provider knowledge
Benchmarking data
0 20 40 60 80 100
Nice-to-have, but not important Quite important Critical
SOURCE: GLOBAL SERVICES MEDIA / AMR RESEARCH SOURCING ADVISER STUDY, JULY 2008
What would be your preferred pricing for Will you use a third-party adviser again in the
sourcing advisory services, if you were to use future for sourcing advice?
them again in the future? (%)
n=63 Customers n=64 Customers
Special Report
PROVIDERS ON ADVISERS…
In your opinion, have sourcing advisers been Are there sourcing advisers with whom you
a positive or a negative influence on assisting refuse to work? (%)
their customers’ sourcing strategies? (%)
n=106 Providers n=103 Providers
17 Negative 25 Yes
83 Positive 75 No
From your experience, how can advisers improve their sourcing process/methodology?
l By NOT pushing their own agenda (sales) at every instance
l Start focusing on the mid market customers too and also customize their RFPs to their needs
l More frequent communication with service providers
l Advisers with more hands-on experience and greater understanding of how sourcing is changing
l Keep learning and educating themselves and networking and helping each other
l Allow the providers to have a dialogue with the prospect during the sales process
l They must be open to encouraging lesser-known, yet competent, providers and not follow the trodden path only
l Reduce number of providers considered
l Have right attitude versus “beat up provider” mentality
l Hire people who have real-life experience in outsourcing delivery and implementation.
Special Report
Advisers’ dashboard
Name Year Total staff Staff to Global presence
founded manage
Full-time Part-time / Other service Americas Europe Asia Pacific
employees contracted provider Office(s) OAS
advisors Office(s) OAS Office(s) OAS
relations per- per- per-
sonnel sonnel sonnel
Alsbridge 2002 100 — 15 1 ND* ND* ND* ND* ND* ND*
Archstone 2003 40 0 2 0 In 5 210 In 1 40 — —
Consulting countries country
Avasant 2006 40 100+ 11 1 7 81 1 20 1 50
Deloitte 1840s 420 300 ND* 20 892 440 419 230 178 50
EquaTerra 2003 225 15 50 ND* 4 194 5 90 2 6
KPMG 1987 250 400 — 0 In 4 ND* In 10 ND* In 7 ND*
countries countries countries
neoIT 1999 ND* ND* ND* 3 1 ND* 1 — — ND*
PA 1943 400 0 100 0 11 410 14 2,055 7 135
Consulting
Pace 2003 38 22 3 1 2 63 0 0 0 0
Harmon
Pillsbury 1868 55 2 3 — 4 49 1 8 0 0
Winthrop
Shaw
Pittman
The W Group 2002 25 15 5 25 1 45 0 0 0 0
TPI 1989 ND* ND* ND* 1 ND* ND* ND* ND* ND* ND*
*NOT DISCLOSED; SOURCE: GLOBAL SERVICES MEDIA / AMR RESEARCH SOURCING ADVISER STUDY, JULY 2008
Special Report
Name Revenues in % of Revenue How do you charge your Where do you see a In the next 18 months,
2007(A: $1 to Attributed to A: Sourcing customers? (A: Flat project change*? (A: Flat project changes expected in A:
$10 mn; B: $11 to Strategy & Evaluation; B: fee; B: Billable hours; C: Fixed fee; B: Billable hours; C: Fixed Sourcing Strategy &
$50 mn; C: $50 Solution, Design & project fees + billable hours; project fees + billable hours; Evaluation; B: Solution,
to $250 mn; D: Contracting; C: Transition & D: Monthly flat rate; E: D: Monthly flat rate; E: Design & Contracting; C:
$251 mn+) Governance Services Annual subcription; F: Other) Annual subcription; F: Other) Transition & Governance
* In the next 18 months
Deloitte Not Disclosed A = 40, B = 30, C =30 B A = up, E = continental A = up, B = up, C = up
fee arrangements
EquaTerra Not Disclosed A = 15, B = 60, C = 25 A, B, F (at risk based on A and F (at risk based on A = up, B = down***,
outcomes) outcomes) C = up
Special Report
IT infra, app.s, HR Claims — HR, call IT infra, app.s Consumer packag- Retail, automotive, Chemicals,
F&A, procurement, Proces- center F&A, procurem- ed goods, financial other mfg, telecom, public
call center sing, en- ent svcs, health care tech, transportation
gg., & logistics, utilities,
design media
IT infra, app.s, Call center, RPO, — Call cent- IT infra, app.s, Financial svcs, tele- Retail, consumer —
F&A, HR, procure- product KPO er, M&As F&A, HR, procur- com, high-tech, util- packaged goods, aut-
ment, M&As development ement, KPO ities, media, public omative, other mfg,
transportation &
logistics
IT infra, app.s, KPO — HR IT infra, App.s, procure- Retail, chemicals, Consumer packaged —
F&A, HR, procure- F&A, call ment, M&As other mfg, financial goods, automotive,
ment, call center center, svcs, telecom, hi-te media
KPO ch, health care, util-
ities, public
IT infra, app.s, F&A, — — — — IT infra, app.s All — —
HR, procurement, F&A, HR,
call center procurement.
call center
IT infra, app.s, F&A — — — HR, proc- IT infra, app.s, All — —
HR, procurement, urement, F&A
call center call center
App.s, F&A, IT infra, HR, — — — IT infra, app.s, Mfg, financial svcs, Retail, consumer pa- Chemicals,
procurement call center F&A, HR, telecom, tech, ckaged goods, auto- transpor-
procurement health care motive, utilities, med- tation & logis-
call center ia, pubic tics
IT infra, app.s, F&A, HR, procem- — — App.s, HR, IT infra, F&A High tech, telecom Retail, mfg, financial —
high-tech, media ent, call procure- svcs, insurance, hea-
center ment, call lth care, media, utili-
center ties public
IT infra, app.s F&A — — IT infra, App.s, F&A, HR, Financial svcs, Retail, consumer pa- —
HR, procurem- call center procurement insurance, telecom, ckaged goods, chem-
ent, call center tech, utilities, health icals, automotive,
care, media, public other mfg, transpor-
tation & logistics
IT infra, app.s, HR — — Procuem- IT infra, app.s, Retail, other mfg, Consumer packaged —
F&A, procurement, ent, call F&A, HR financial svcs, high goods, automotive,
call center center -tech, telecom, utili- transportation & log-
ties, health care istics, media, public
IT infra, app.s, F&A, — — — App.s, HR, IT infra, F&A, Retail, consumer Automotive, transpo- Chemicals,
HR, procurement, call center procurement, packaged goods, rtation & logistics, public
call center facilities mgmt., other mfg, financial utilities
telecom, manag- svcs, telecom, tech,
ed network svcs health care, media
IT Infra, app.s F&A, HR, pr- — — HR IT infra, app.s, Retail, consumer pa- Transportation & log- Chemicals,
ocurement, F&A, procureme- ckaged goods, mfg, istics, utilities automotive,
call center nt, call center financial svcs, telec- public
om, hi-tech, health
care, media
IT infra, app.s, HR, F&A, procur- — — — — All — —
F&A, BPO, multi- ement, call
process center
** INCREASE; *** DECREASE; SOURCE: GLOBAL SERVICES MEDIA / AMR RESEARCH SOURCING ADVISER STUDY, JULY 2008
GS 100 survey A list of world’s 100 most innovative IT and BPO service
providers, which are selected on the basis of an annual
survey conducted by neoIT and Global Services.
Print Online Events Custom
www.globalservicesmedia.com
feature-processes.qxp 8/22/2008 12:05 AM Page 32
Process Frameworks
Help or Hindrance?
Do process frameworks such as ITIL, Six Sigma and Lean deliver in the
context of services outsourcing? A look at the challenges and opportuni-
ties in making them work
By Namita Goel
F
RAMEWORKS ARE MEANT TO simplify borrowed from the manufacturing world, and can be
complex processes and make them more effi- used in outsourcing any kind of process, ITIL is more IT-
cient. But processes themselves are so dynamic focused, and can be used in any IT process. The trend
that it forces one to revisit the framework and over the past few years has been such that many providers
readapt it to use. If you add outsourcing to that, have come out with their proprietary frameworks, in
the complexity increases much more. Therefore, to keep up which they pick up best practices from the existing stan-
with this change and manage the complexity, training pro- dard frameworks.
grams in organizations are a fine mix of standardized frame-
works and need-based concepts. Challenges in Adopting Frameworks
Most of these frameworks such as IT Infrastructure These frameworks are all organization driven and require
Library (ITIL), Six Sigma and Lean help customers as well an effort to ensure that the employees take them seriously.
as service providers in getting rid of the waste in the process, “At IBA, we have optimized the procedures of incorporating
explained Derek Lonsdale, Managing Consultant-IT and deploying the frameworks, and are carried out through
Practice, PA Consulting. In some cases, they help the cus- the implementation of an automated project-management
tomers in understanding what part of the process to out- system here. We also organize trainings of software develop-
source. Agreeing with Lonsdale’s point of view, Mudit ers and regular auditing of the employees to test the process
Saxsena, SVP and Global Six Sigma and Transitions Leader, understanding,” explained Zinaida Larionova, Top
Genpact added, “These frameworks help in assessment of Management Quality Representative, IBA, an IT service
data and identification of the waste in the processes to provider based in Eastern Europe.
increase the overall efficiency of the processes.” Apart from ensuring that frameworks are well under-
While Six Sigma and Lean are generic frameworks stood, the challenge also lies in the seamless integration of
the customized framework into the existing one. “Many of investment, it’s next to impossible to be successful,”
these processes are being performed in some form or fashion explained Kevin Smilie, Director, Chief Information
in the customers’ environment before they begin to adopt Officer-Services, TPI, a sourcing advisory firm.
ITIL standards. The challenge they face is in adapting their Training is another challenge that many firms face. “The
current processes to take advantage of the standards and to ITIL framework has five modules and each of which is
deploy the standards for those processes that are absent. around 250 pages long so for an employee to read through
With the proper sponsorship and investment, incorporating over 1,000 pages of information becomes a challenge. So
the processes isn’t difficult. Without that sponsorship and here at PA Consulting, we modify the frameworks as per the
process requirements so that the employees can relate to it
and understand it better,” added PA Consulting’s Lonsdale.
CASE STUDY - I “Incorporating these frameworks at the customer site in
the customer processes is another challenge,” added Tajinder
Vohra, SVP and Business Leader, Genpact. Change man-
Change Management / ITIL agement is an integral part of outsourcing and in most of the
Customer: A global chemical company
cases, despite the fact that the work is outsourced to the
Provider: IBM provider, the customer is expected to have the same level of
A global chemical company outsourced its IT infra- understanding of the framework as the provider to be able
structure to IBM to improve end-user IT services. ITIL to govern the sourcing relationship better. So, it is the
standards were chosen as the means to standardize providers’ responsibility to ensure that the people involved
the IT infrastructure across providers.
in the sourcing process from the customer side are on the
Challenge: same page. Herein, conducting regular training sessions
After a year into the contract, the infrastructure- would help.
service levels failed to improve as intended, and
IBM’s account team investigated the issue. The main
cause was determined to be the number of emer-
The Drivers- Customers or Providers?
gency changes that the customer approved. IBM Both the customer and the provider could be the driver.
initiated a Change Management Improvement “ “Based on experience, almost 95 to 98 percent of proposals
Team consisting of members of the CAB (Change that we respond to, the customers are very keen to under-
Advisory Board), the IBM Change Coordinator and a stand quality assurance processes, the approach we will fol-
Process Specialist.
low to deploy quality practices, our continuous improve-
Solution: ment focus and how we’ll bring value addition to their
The ITIL change process was used as a guide to processes year on year,” said K.V. Rammohan, VP, Infosys.
determine gaps in the current change management “It is both. We have had situations where we have asked
process. The team determined that the normal
our customer to be certified because of the work they are
change cycle time was too long, and that the project
managers had not been trained on the change doing, and we also have had contracts where the customers
process when implementing software changes. have said we will sign the contract with you on a condition
Results: that you have to get ‘x’ number of people in the certified,”
explained Debora Verisario, Global Program Manager,
l The cycle times for non-emergency changes within
the customer’s process were examined and restruc- Process Standards Center of Excellence, IBM.
tured. By using Lean to eliminate waste, the cycle In some cases, it is mutual adoption of frameworks that
times were greatly reduced so fewer emergency wins the case. “Where the customer’s process maturity is
changes were requested believed to be below that of the service provider, the cus-
l Through the implementation of a more thorough tomer will adopt the service provider’s process. For the cus-
change form template, the change process improved. tomer team, it means understanding the service provider’s
So the customer’s CAB had better information at the
process and how it’s different from the current customer
start of their process, thereby reducing the time it
took to ask additional questions processes to be able to make the changes. In other cases, the
customer will require the service provider to integrate to the
l By providing project managers with training and
a calendar to use for advanced scheduling, the
customer’s process. This is a matter of understanding the
number of emergency changes were cut in half point in the process where the customer’s process stops and
after three months the service provider’s process begins once the service has
l Due to the improvements in change management, been outsourced,” explained Smilie of TPI.
the overall stability of the IT environment increased
and end-user satisfaction improved. The Sourcing Decision
The customer’s perception of the service provider’s
process maturity is factored into the selection decision.
INFRASTRUCTURE MODEL
This infrastructure
model shows a set of Info
rm
end-to-end integrated t at
en ion
services that are m
M
focused on maximizing
ag
an
efficiency and effective- an
gema
rvice M
ness whilst minimizing
risk. These include:
ent and
l An integarted portfo-
Se
S
protection
ec
i n
us
u
r it
l End-to-end service B y
management that helps
improve the customer
experience.
SOURCE: CSC INDIA
IS LPO
RIGHT for your
company ?
M
ANY CORPORATE LEGAL DEPART- generated $236 billion in revenue, and is expected to grow
MENTS and even law firms in the U.S. are steadily at a rate of over six percent per year for the next
experimenting with Legal Process decade, according to the U.S. Census Bureau. This sizeable
Outsourcing (LPO) as a means to reduce market offers a ripe and lucrative environment for LPO to
costs and increase efficiencies without sac- take hold.
rificing, or sacrificing too much, the expected Quality of Indeed, to meet perceived growing demand, innumer-
Service (QoS). The momentum behind the current popu- able LPO providers have entered the marketplace offering
larity of LPO is a reaction to the steadily increasing legal alternative service, resulting in the outsourcing of certain
costs in the U.S. and to some extent as well the economic legal tasks and services. Only a few years ago, the LPO
headwinds in a recently faltering global economy. LPO model was viewed with substantial skepticism and raised the
growth potential may perhaps directly correlate with the question of whether it was “even legal,” but LPO is now
overall size and projected growth in the legal-services market viewed as a viable alternative in certain circumstances for
in the U.S. In 2006 the legal-services industry in the U.S. companies’ legal needs. With that said, the framework
required to regulate the LPO industry properly and to meet its legal needs consistent with its overall strategic busi-
address the legal and ethical issues that are certain to arise ness goals and objectives.
is still in the nascent stage but is evolving. While the U.S. Some of the fundamental assessments under a thought-
legal community has yet to take any kind of definitive ful LPO gating analysis include: What are the legal needs,
stance on the viability of the LPO model, the LPO indus- services, and requirements that may be suitable for an LPO?
try appears eager to embrace some form of self regulation What are the dependencies where a complete handoff of the
to establish itself. legal tasks and services is not possible? Are the services need-
Specifically, a company selectively delegates certain ed on a recurring basis (such as patent application prepara-
legal functionalities and services that are traditionally per- tion), a non-recurring basis (such as unique litigation involv-
formed in the U.S. to an LPO provider at an offshore loca- ing facts peculiar to a large contract) or an intermittently
tion, such as India. That provider offers the combined ben- recurring basis (such as periodic product-liability claims or
efit of a skilled or trainable workforce that is available at certain due diligence tasks associated with transactions or fil-
wages significantly lower than those demanded by U.S. ings)? Do the services at issue relate to core or non-core busi-
counterparts. In other words, the basic value proposition ness functionalities? Does the customer take on some level
of the LPO is that outsourced legal work is performed in of additional risk related to the source of the need for the
the offshore location by trained lawyers (licensed in that legal services by engaging in an LPO with respect to the ser-
jurisdiction) and paralegal staff at some fraction of the cost vices, and if so how much? How important is cost savings
of having the same work performed by the U.S.-based legal vis-à-vis QoS? How do the possibly outsourced services sup-
professionals. Services subject to LPO can range from tasks port or fit with the overall strategic corporate business goals
such as legal coding and legal transcription to more and objectives?
involved projects involving legal research, litigation sup- As part of the LPO gating analysis, companies contem-
port, document review, contract drafting and manage- plating LPO must also carefully assess the generically applic-
ment, legal publishing, and Intellectual Property (IP) relat- able risks, ramifications and ethical concerns inherent in off-
ed services, such as patent application preparation. In addi- shoring legal work that come hand in hand with the bene-
tion to the cost considerations of LPO, it may also enhance fits of LPO. Some of these key risks and ethical considera-
home-base productivity by “freeing up” the customer to tions peculiar to an LPO include (i) the risk of unauthorized
focus on strategic and value-added legal work as well as to disclosure of confidential information, (ii) liability concerns
take advantage of time-zone differences in offshore loca- related to the unauthorized practice of law, (iii) how to pro-
tions, thus enabling 24x7 operations. For these reasons, tect, and avoid, the unintended or inadvertent waiver of the
among others, LPO presents a new strategic option for attorney customer privilege and assessing whether it even
legal departments and law firms. would apply in the first place, (iv) the lack of robust proce-
Whether a real benefit is available through LPO to a spe- dures to identify and resolve conflicts of interest, (v) the
cific company, however, depends sub- recognition when applicable of the
stantially on a sober assessment of the need for client consent, (vi) fee-sharing
company’s legal needs and require- MOST LPO DEMAND IN arrangements and customer disclosure,
ments, and whether the legal services
and tasks at issue can be realistically
THE U.S. CURRENTLY and (vii) compliance with export con-
trol laws with respect to offshoring
outsourced without sacrificing impor- INVOLVES “LOW- information regarding U.S.-originated
tant qualitative considerations — inventions for patent-drafting services.
meaningful quality degradation can
VALUE” LABOR-INTEN- Most LPO demand in the U.S. cur-
counter productively result in the SIVE LEGAL SERVICES. rently involves “low-value” labor-inten-
added cost of home-base “redo” as well sive legal services, such as legal tran-
as increase the company’s risk profile. A
AS THE LPO INDUSTRY scription, document conversion, legal
properly performed initial assessment MATURES, THE OUT- coding and indexing, and legal data
of the virtues and vices of an LPO, or entry, predominantly provided by
basically an “LPO gating analysis,” SOURCED LEGAL WORK India-based LPO providers. As the
should determine the answers to the WILL LIKELY MOVE UP LPO industry matures, the outsourced
questions of whether, to what extent, legal work will move up the value
where and how a company may suc- THE VALUE CHAIN. chain. A research company,
cessfully deploy the LPO model to ValueNotes, estimates that in 2006
India’s LPO industry generated $146 million in revenue and third-party LPO firms that provide legal services to U.S.
projects it to grow to $640 million by 2010, and by that corporations and law firms (these firms include niche firms
time LPO firms in India are expected to employ over 32,000 such as Pangea3, Qusilex and Lexadigm that only provide
professionals. While another research company, Evalueserve, legal-services and multiservice firms such as Infosys and
is more conservative in its LPO projections, the fact that WNS, which provide legal services in addition to other BPO
LPO is likely to become a sizable mainstay in the U.S. legal- offerings). Variations of these models will emerge as the
services market is increasingly difficult to question. LPO industry matures to better service LPO customers.
India’s emerging prominence in LPO is not surprising Each model has its own advantages and risks that must
given the remarkably successful Indian market for IT out- be evaluated carefully so as to identify and assess the relative
sourcing (ITO) and Business Process Outsourcing (BPO). pros and cons for a particular LPO strategy. LPO customers
More recently, many U.S. companies have engaged in what should adopt different delivery models taking into account
are known as Knowledge Process Outsourcing (KPO) trans- numerous variables, including the nature and scope of the
actions, which leverage India’s vast resource of highly skilled, activities to be offshored, previous offshoring experience, a
educated workers to perform knowledge-driven or “high- qualitative due diligence review of the potential providers’
end” processes that require specialized domain expertise. work, concerns about security and control of confidential or
LPO — a specific example of KPO — is one for which privileged information, risk tolerance, tax considerations
India offers enormous potential because of its large reservoir and budgetary constraints.
of English-speaking lawyers and paralegals whose salary In sum, LPO can present a viable alternative to compa-
demands are extremely competitive at typically only 10 to nies seeking to reduce their legal costs. Its usage, however,
15 percent of those of their U.S. counterparts. This profes- must be considered very thoroughly and carefully taking
sional labor pool shows no sign of shrinking; indeed approx- into account the circumstances and needs involved. A com-
imately 80,000 Indian lawyers graduate each year from law pany considering an LPO must, therefore, objectively eval-
schools. These graduates are also particularly well-suited to uate the specific and unique gating issues described above
service the U.S.-based legal needs because, like the U.S. and relating to the value proposition of a particular LPO, the
the U.K., India’s legal system follows the common law generically applicable risks of any LPO, the offshore location
model and its rapidly modernizing legal and regulatory envi- and the provider involved, and the type of LPO model that
ronment is based on the U.S./U.K. model of jurisprudence. best suits the needs of the potential LPO customer. GS
Most of the LPO demand has been met primarily by two
service delivery models: Captive centers of U.S. corporations Dan Masur and Sonia Baldia are partners in the Business & Tech-
or law firms in India (such as those set up by GE, Cisco, nology Practice Group at the law firm Mayer Brown LLP in Wash-
Oracle, Dupont, and Bickel & Brewer, to name a few) and ington, D.C.Mayer Brown LLP
T
he legal-services offshoring business in India is expected to reach $640 million by end 2010. The Indian
growing at a tremendous pace. Even as several other provider landscape comprises over 100 players employing
segments within BPO are being buffeted by the more than 7,500 people. There are around 12 to 15 large-
global economy, outsourcing legal services is steaming service providers who employ over 100 employees. Third-
ahead with robust growth rates of over 40 percent. While party providers dominate the segment by employing the
several large, mid-size and small companies are enthusias- majority of the workforce in the sector.
tically entering LPO, the industry is rapidly moving Over the last two years, the LPO space has seen a rapid
toward more innovative business models and offerings led change in terms of attracting investors, maturing provider
by the earlier entrants, as they try to differentiate them- capabilities and luring large BPOs to enter the market.
selves from the pack.
Though the LPO industry is growing rapidly, it address- Investors Get Interested
es a mere three percent of the offshorable potential. India Most providers started off as self-funded companies and
revenues from LPO were $225 million in 2007, and are a few received funding from angel investors. In order to
While corporate due diligence, patent related services are However, the addressable market for Indian providers is esti-
higher value services, there are certain services such as docu- mated at $2.2 billion, which is around 50 times larger.
ment review, word processing and litigation-support services India revenues are expected to grow at 35 percent per
where several generic, multiservice players with the capabil- annum for the next five years. We expect the industry to
ity to scale are competing and getting work in abundance. achieve revenues of $206 million by end 2012. The prima-
“Conveyancing is a high-volume job, parts of which can be ry growth drivers are: Growth in worldwide patent market,
offshored. Litigation support and Document production are increased offshoring of R&D activity, lack of manpower and
examples of other services that can be offshored,” says the impact of the U.S. Patent Reform Act of 2007.
Amanda Burton, Director, Global Business Services,
Clifford Chance. Imperative to Have On-site Entity
There is a strong preference among customers to out-
Move Toward Longer-term Contracts source to U.S. law firms or legal-services providers with a
With law firms getting more comfortable with the U.S. presence. While an on-site entity is essential for most
idea of offshoring, larger and longer-term contracts, as of the segments/verticals within BPO, it is an imperative for
well as several encompassing multiple services are becom- the legal services. This is primarily because confidentiality is
ing increasingly common. still a big issue with regards to patent-related work and one
“The lifecycle of commoditized legal cases and trans- big advantage with hiring a local law firm is that they have
actions both for U.S. and U.K. Law firms and organiza- the legal obligation to maintain confidentiality of their cus-
tions can be processed from start to finish from an off- tomer’s information. There are several advantages in work-
shore destination. Currently, elements are being off- ing with a firm that has an onshore location. Apart from
shored. However, we will gradually witness the offshoring proximity and the advantage of face-to-face contact, one sig-
of the entire process,” says Mark Ross, Director, Business nificant and very important benefit is the customer’s ability
Development, LawScribe. to seek legal recourse, if necessary.
Today, larger and longer-term contracts, as well as sev-
eral encompassing multiple services are becoming The Way Forward …
increasingly common. Some of the larger deals include Corporates as well as law firms are offshoring greater
Clifford Chance-Integreon, Allen & Overy-OfficeTiger, volumes and more complex work. Further, the customer
to name a few. Moreover, the work being outsourced is a concerns are shifting from “is it secure to offshore and
mix of legal work such as legal-research and support ser- will the service providers be able to do a good job” to
vices. This is benefiting larger providers with multiple “whether the service provider will be able to handle
service offerings. greater volumes of work.”
So far, Indian outsourcing rode the value proposition of
Patent Services: The Next Big Segment within significant labor cost savings. High returns for industry pio-
Legal Services neers has led to an explosion of service providers and those
Patent-services offshoring is the next big opportunity ready to provide funds to them. The LPO segment will
within LPO services. Revenues from offshored patent ser- continue to remain in a high-growth phase till the end of
vices to India were estimated to be $46 million in 2007. this decade. GS
Current Indian
LPO position
46
Dec. 2006 Dec. 2010
Experts
Outsourcing Strategy Set? Don’t
Forget Customer Communications
Beyond the basic business process and IT offshoring practices, the next
wave of outsourcing revolves around newer functions such as customer
communications that can facilitate your both sides of the profit equation
— cost savings and revenue growth. In addition, it can also boost the
satisfaction among your employees
By Bryan Baker, Thought Leader and Enterprise Consultant, Xerox Global Services
company in order to produce a rela- accelerate, collapse or cut short this high-level executives. The relationship
tionship that will continually grow assessment due to time constraints, but must be sponsored by an influential
stronger and not go stale. The first projects where the due diligence efforts champion to see the opportunities that
question to ask is “what problems are we are cut short and assumptions made are a high-value partner can capture.
trying to solve, or what opportunity are prone to fail. Step five: While cost will always be a
we trying to capture?” Step three: Any time an outsourcing ini- consideration when selecting a partner to
Beyond volume, timeline and unit tiative is implemented within a compa- outsource such a vital aspect of your
cost goals, a good customer communi- ny, a change-management strategy is organization as customer communica-
cations outsourcing relationship will set essential for obtaining employee buy-in. tions, basing a decision on cost alone will
goals for: These new procedures typically cross fail to produce optimal results. If the
l Optimizing the communications multiple lines of business and various decision is based solely on identifying the
infrastructure for employees company- populations. It is important for all sides lowest bidder, you pose the threat of
wide to understand the additional or different missing out on the innovative thinking
l Improving customer retention support requirements — especially in that providers may be hesitant to include
through improved communications the first few months. These may include given cost pressures. A balance between
l Reducing call center costs technical and end-user support, either in short-term cost reductions and investing
l Complying with laws and regula- the form of on-site staff or hotlines. in innovation to drive long term business
tions Due to the complexity of outsourc- results define strategic partnerships. This
l Maintaining consistent brand ing customer-communications services, approach enables companies to get more
messaging. change management often focuses pri- value from an outsourcing relationship
The risks of poorly planned customer marily on the tangible deliverables in the through the life of the partnership.
communications can be enormous. Late contract. For example, at any point in Step six: After goals are set, the tenden-
mailings, compliance violations from the relationship a provider may install cy is to track top-line milestones such as
“double stuffs,” where one customer new technology, workflow or hire new deadlines being met and unit costs,
receives another customer’s confidential staff. These efforts are normally on the while the work of collecting and ana-
mail and incorrect letterhead or logos radar for scope creep and go through the lyzing the data falls short. The right met-
can all lead to expensive call center change-management process when rics and regular reporting build confi-
inquiries and unhappy customers. changes occur. dence and trust while helping to sustain
Step two: Before your partner can help However, if the organization’s IT the relationship.
take your customer communications to department decides to make significant For example, in a strategic cus-
the next level, both parties must first changes to the applications that gener- tomer-communications outsourcing
have understanding of the current state ate or impact customer communica- relationship, the focus needs to be on
by performing a rigorous assessment. tions, the changes could have a dramat- the business outcome of the commu-
During this step, a blueprint for a ic impact on the process that creates nications. Are calls to the call center
successful future relationship is built. documents. Understanding upstream being reduced? Are customer respons-
All technical considerations, cultural changes that can impact the scope of es increasing? How are employees
impacts including how employees will work being outsourced is crucial. reacting to the new system? Without
react and if there is a current resistance Step four: Like any other corporate ini- facts to guide future decisions, refine-
to change, financial analyses, along tiative, the success rate for outsourcing ments and improvements are impos-
with external factors should be dis- customer communications dramatical- sible. Even worse is when a relation-
cussed. There is often a tendency to ly increases when the plan is backed by ship is measured using a bad metric.
THE SCIENCE OF COMMUNICATION l Information chunk size After the assessment, the team took
ENGINEERING l Multiple channel information a look at how to use communication
In addition to avoiding some of the l Focal information engineering to improve the actual doc-
common pitfalls that exist when search- l Punctuation uments and make them more effective.
ing for a customer-communications l Feedback Digital Print-On-Demand (POD) was
firm to partner with, there is an evolv- l Protocol. added to produce high-quality, cost-
ing science of communication engi- When these elements are strategical- effective documents in much smaller
neering to consider when planning a ly considered in communications, doc- quantities — meeting the needs of indi-
communications overhaul. ument effectiveness is maximized and vidual salespersons. Implementation of
One of the most powerful ways to changing the document structure alters POD was so successful that Owens
improve customer communications is to the experience; thereby impact results. Corning now produces all of its materi-
reengineer them. It is not enough to sim- als with this method. Fulfillment success
ply redesign documents to achieve a CASE IN POINT: OWENS CORNING rate is now at 98 percent, with an order
fresh look. Re-engineering can take cus- Building materials manufacturer cycle time reduced from 30 days to two.
tomer communication to a new, more Owens Corning had a dilemma. The The need for warehouse space has
focused level with behavioral science company’s sales force did not have access reduced, obsolescence and waste are
modeling. This technique has tradi- to effective marketing materials. It took dramatically lowered and “document
tionally been used by clinical psycholo- too long to fulfill a salesperson’s request hoarding” is virtually non-existent. All
gists who have known for decades that for materials, leaving individuals with stakeholders are confident that the doc-
structuring a conversation with a person inadequate supplies to close deals. This uments they want will be in stock and
in a specific way, makes it easier for them also resulted in the hoarding of materi- delivered in a timely fashion.
to absorb and act on complex informa- als, requiring the company to produce
tion. It turns out these structures apply far more materials than necessary and GAIN COMPETITIVE ADVANTAGE
to all communication. ultimately waste money. Outsourcing customer communica-
Specifically, the structure of the doc- Owens Corning had two immediate tions can be an effective way to bring
ument is used as an active agent to elic- issues to solve: First, the need for effec- world-class capabilities to your organi-
it a more beneficial response from the tive communications to their customers zation that impact both cost savings and
reader, not to trick or manipulate, but to and second, a happy sales force. revenue growth. Aside from this, perhaps
clearly drive more effective business The company decided to outsource your biggest benefit will be the satisfac-
behavior. its customer communications to Xerox. tion of your own employees who will
One of the modeling tools developed The partnership began by forming a end up happier as a result of having
by psychotherapist Stephen Lankton is team made up of representatives from more accurate and accessible documents
called the “Anatomy of an Interface.” It both companies who completed an through a streamline customer com-
is built upon the premise that there are extensive assessment using Six Sigma munication solution. GS
eight key elements in every effective methodologies. This methodology is a
communication. These eight elements rigorous, data-driven approach to Bryan brings 17 years of production and out-
involved in every effective communica- process improvement. The current oper- sourcing experience to his role as enterprise con-
tion that move people from perception ation was analyzed, including looking at sultant for Xerox Global Services. Baker and his
to decisions and action include: the entire document supply chain from team provide customers with solution design,
l Syntax end-to-end to determine all of the inef- implementation and project management of
l Framing cues ficiencies that existed. advanced document solutions.
O
nce a year, in July-August the previous year — that is a growth of Infosys had a better growth this year or
every year, we at Dataque- 28 percent, compared to the growth in last year? Did IBM’s India revenue grow
st, analyze the perfor- FY07, which was 35 percent. better this year or last year?
mance of Indian IT Now, convert that to USD in the I do not know the answers, despite
industry. I thought of prevailing average exchange rates of cor- having all the numbers and stories
sharing the major findings of the responding periods. In FY08, Indian IT- behind them.
research, especially the export of IT ser- services exports stood at $46.6 billion, as With increasing globalization but
vices from India. compared to $33.6 billion in the same multiple currencies, this is an issue we
On the face of it, it is a fairly simple period the previous year. Now, that is a will increasingly face. If we do not have
thing to do — get all the numbers and growth of 40 percent, as compared to a solution, all these number crunching
analyses straight from the research my 33.5 percent in FY07. will have little meaning. Companies
colleagues have painstakingly conduct- You do not have to be a great math- listed in both U.S. and India will have
ed and presented in Dataquest, and ematician or an economist to figure out to tell their investors completely differ-
summarize them for you. that INR appreciated significantly ent stories. American companies having
I just had to do a little arithmetic — against USD between Apr. ’07 to Mar. more and more business in emerging
convert all the figures from Indian ’08, whereas it depreciated a bit between markets will have to explain to their
Rupees (INR), the currency that we use the corresponding period a year back. investors, for example, why despite hav-
to present all our data, to U.S. Dollars My dilemma: I have told all my read- ing a better outlook for Mexico, the
(USD). That is when I realized that the ers of Dataquest that the growth slowed Russian business grew far faster —
seemingly simple exercise was anything down from 35 percent in the previous thanks to the currency-adjusted growth
but simple. Let me explain. year to 28 percent last year, with all the playing the mischief.
Take Indian IT-services exports. explanations of why it happened. So, Does anyone have a reasonably
Between Apr. ’07 to Mar. ’08, the Indi- how do I explain you why the growth simple answer? GS
an FY08, in rupee terms, IT-services accelerated from 33.5 percent to 40 per-
exports from India was Rs. 1,884,480 cent? Did Indian IT-services exports Shyamanuja is Editor, Dataquest,
million, up from Rs. 1,478,810 million actually slow down or accelerate? Did CyberMedia.
Handshakes, Eyeballs
Readers & Viewers
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experts_phil fersht_Final.qxp 8/22/2008 12:23 AM Page 48
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any executives can be prises. We will be covering the market
naïve and fail to under- for third-party outsourcing advisers in an
stand the complexity of
Ensure you engage an upcoming research article — AMR
outsourcing contracts. adviser with experi- Research addresses critical business chal-
Pressured to get the deal lenges with its expanded coverage of IT
done, too many executives focus on price
ence in those areas, and Business Process Outsourcing
terms, but neglect most of the rest of the which will give you (BPO) services — as part of our expand-
deal. Outsourcing providers, on the ed outsourcing research coverage.
other hand, negotiate outsourcing agree- value for money. Many enterprises are also getting
ments for a living, and their standard smarter and better-educated with out-
contracts (the ones they hand to you to sourcing issues, and we are increasingly
start a relationship) are seldom written engage a third party at some stage dur- seeing more executives (mainly For-
in the spirit of partnership. Provider sales ing the outsourcing lifecycle, whether it’s tune 500) trying to do more them-
executives are well-trained experts in cre- simply to administer and negotiate a selves and relying less on advisers.
ating negotiation leverage. Good sales complex contract, or to hold your hand This is a natural control mechanism
teams actually mathematically predict through the entire evaluation process, when companies take themselves
the probability of winning a deal, that’s contract signing and beyond. through such sensitive change.
how experienced providers really are. There are several key stages through
And in today’s rampant market for which to progress, when you evaluate WHAT SHOULD YOU LOOK FOR IN
enterprises exploring their outsourcing outsourcing, if you are going to move ATHIRD-PARTY ADVISER?
opportunities, outsourcing providers are into an engagement. An advisory firm’s competencies,
being increasingly selective about where in our experience, must include
they are investing their pursuit costs. BE WARY OF ADVISERS the following:
Executives’ procurement and legal teams COMPETING FOR YOUR BUSINESS l The ability to share intellectual
are often inexperienced with complex When dealing with third party advis- property internally to create benefits for
contract negotiations. This means you ers, you usually get what you pay for. customer engagements. The adviser
need to ensure you get expert help and However, be warned as we have seen sit- may boast impressive logos of its previ-
advice with negotiating your outsourc- uations where enterprises have paid top- ous customers, but if it hasn’t been able
ing contract. dollar for third-rate advice, and others to take benchmarks, best practices from
There has never been as great a need where customers received great service these engagements, then you’re relying
for outsourcing advice as there is today, from one of the smaller, cheaper firms. purely on the experience of the individ-
and there has never been such a pletho- We are currently receiving inquiries ual people assigned to you.
ra of advisers competing to give their almost daily from enterprises asking l The depth of experience of its
advice. And whether you are a highly how and whom they should approach advisers within the firm. Harvard
sophisticated enterprise with outsourc- when selecting a third-party adviser. It’s MBAs are a nice-to-have, but this is
ing experience, or a complete novice in becoming almost as important as to largely deep operational work conduct-
this domain, you will most likely have to which provider to select for some enter- ed at a level below the ivory tower.
Ensure you have detailed knowledge of l The operational business focus providers to propose on your business.
the backgrounds and experience of the and experience of its advisers beyond Don’t be afraid to ask your providers’
advisers assigned to you. Ask to inter- simply negotiating contracts. If you opinion on the advisers to work with,
view them individually prior to agreeing only want an adviser to come in and keeping in mind of course that you’re
to sign on to their services. negotiate a contract, then that is all you relying on the adviser to have an inde-
l The advisory firm’s mix of expe- need to focus on with them. However, pendent point of view. (See point “True
rience. This should include talent that some advisers can offer services that can independence in achieving the opti-
has come from operational backgrounds help you all the way through the out- mum outcome for its customers.”)
and has experienced outsourcing on the sourcing lifecycle and beyond, for exam- l Multiple customer references with
customer side, not simply staff with out- ple post-transaction support, retained whom you can talk directly and dis-
sourcing provider and previous sourcing organization design, change manage- creetly. Your ultimate proof of capabil-
advisory experience. ment and provider governance support. ity will be talking with your peers in
l The firm’s ability to “advise” and In many instances, we have seen enter- other companies who have engaged
not just “consult.” You want an advis- prises gain more value from their advis- advisers. Ask for specific customer ref-
er who is going to give you advice from er than simple contractual services; erences and ask to speak to them pri-
their experiences, allow you to talk with sometimes, simply having an indepen- vately, if possible. Moreover, references
their senior practitioners and add value dent third-party at hand can help you from enterprises not put forward by the
over-and-above data-collection tasks. build consensus and support in complex adviser are even more valuable. Try net-
l True independence in achieving and sensitive situations. working with peers on other companies
the optimum outcome for its cus- l A sensible, proven and flexible who have experience of working with
tomers. They must be focused on methodology for business-case evalua- outsourcing advisers.
YOUR best interests, and not theirs’. tion and provider selection. The advis- All-in-all, you should know best
Investigate other business divisions and er needs to have a proven approach that what help you need. So ensure you
service lines within the advisory firm to has been deployed on multiple previous engage an adviser with experience
ensure where their interests lie. Also occasions for taking enterprises through in those areas, which will give you
prod them about their relationships the outsourcing lifecycle. Ask them spe- value for money. If your enterprise
with outsourcing providers to make cific questions on how they applied it in has been through complex outsourcing
sure you’re getting an independent view previous customer cases and how they in the recent past, chances are you
of the market. would work with you during each stage will need a lighter-touch approach.
l A deep focus on intellectual of the cycle. You will learn a lot about However, if this is a first-time experi-
property, benchmarking data and how much they have thought through ence, our advice is to seek an expert to
research — both their own and from your issues when asked about how they help you throughout the entire out-
reputable research firms. An advisory will apply their methodology to your sourcing lifecycle. GS
team of three or four people will never specific situation.
know everything — they need addi- l Having the respect of outsourcing Phil is Research Director, Global
tional knowledge and support. In providers. Outsourcing providers will Services and Outsourcing, for leading
addition, if you have access to unbi- work well with advisers when they industry analyst AMR Research, Inc. He
ased third-party research, this will know they will get a fair crack of the also authors the popular blog “Horses for
give you an important validation point whip. The last thing you want is an Sources” which can be accessed at
as you make difficult decisions. adviser who can’t rally the right http://www.fersht.typepad.com
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lobal talent pools are isfactory. The study shows that among since only 42 percent believe that their
stretched thin. From Bei- the greatest emphasis organizations managers are devoting enough time to
jing to Boston, no organi- should make, one is in driving employ- development and other performance-
zation is safe to assume that ee engagement, particularly by rethink- management activities. Further, only
it will be able to attract all ing the role of employee development. 38 percent of respondents agree that
the talent it needs — at least for the next The study also revealed that many, if employee development needs are being
several decades. Once that realization is not most, organizations recognize the met in a timely and effective manner.
accepted, it becomes clear that the only importance of “integrated” talent man- Improving talent management
remedy is higher productivity among the agement. Eighty four percent of respon- requires rethinking the role of employ-
talent an organization already claims. dents said that senior managers recognize ee development in the organization. In
The only question is how to achieve it. the value of workforce effectiveness in both these studies, and in the IBM
From March to August, the Human delivering business results. “Global Human Capital Study 2008,” we
Capital Institute and IBM Global Busi- However, our research identifies key see a significant concern in organizations’
ness Services partnered in a research gaps between establishing and then exe- ability to rapidly build skills to meet the
study to examine the progress and char- cuting an integrated talent-management changing business needs.
acteristics of talent management in orga- strategy. These gaps hinder the effective As the lifespan of relevant skills con-
nizations. We surveyed 1,900 individu- alignment of talent-management and tinues to shrink, leading organizations
als and conducted in-depth interviews organizational performance. Of partic- are focusing on blending classroom
with 49 leaders from more than 1,000 ular importance is the engagement and training with electronic learning tools. At
public- and private-sector organizations performance gap created when compa- the same time, organizations are com-
worldwide. The respondents varied by nies diminish employee engagement by bining formal instruction with informal
position and included people involved failing to invest in the training and learning opportunities.
with HR and non-HR functions. development of their talent. This study and many others have
One of the critical findings that The study demonstrates the con- drawn links between employee devel-
stood out was the correlation between nection between employee engagement opment, employee engagement and bet-
the employee engagement and organi- and financial performance. As above, ter financial returns. To be sure, other
zational performance. We learned that as motivating and developing employees factors influence engagement and the
organizations seek to overcome the chal- are the talent-management practices link between engagement and profits is
lenges associated with globalization, that most differentiate financial outper- never a straight line. Nevertheless, in an
changing workforce demographics and formers from low performers. However, era of talent shortages, organizations sim-
the emergence of new business models, our interviewees told us that develop- ply must drive better performance from
they are looking at employees as the crit- ment and engagement are areas that pre- employees. Investing in the right talent
ical source of differentiation in the mar- sent most organizations with sizeable development is a key ingredient. GS
ket. However, the search for guidance challenges. Only one-half of organiza-
regarding the value of investing in talent tions say they understand and address Allan is President and Executive Director,
management and where organizations workforce attitudes and engagement. Human Capital Institute. Mail to aschwey-
should place such investments is unsat- “How” they are doing that is unclear, er@humancapitalinstitute.org for full report.
globalservicesmedia.com
RNI No.DELENG/2006/17056
Posting Date: 29&30 of advance month. Posted at MBC/1B. DPR No.DL(S) 01/3284/2007-2009